Could new car prices mimic those of cell phones and other tech products—which get cheaper and cheaper with each passing day thanks to innovation and more efficient manufacturing techniques? On the surface, this looks to already be happening: The starting MSRPs for several 2012 cars from automakers such as Toyota, Jeep, and Mercedes are indeed lower than previous models. Oddly enough, car buyers will probably wind up paying more for 2012 models anyway.
For automobiles, it’s pretty much standard policy that the new model will be more expensive than the previous edition. This isn’t necessarily the case anymore, however. In recent years, Volkswagen managed to lower starting prices on both the Jetta and the Passat, and the result has been a major boost in sales, despite generally poor reviews by car experts.
Now, as a Kiplinger story notes, several other car manufacturers are following in Volkswagen’s footsteps. Toyota, Jeep, Lincoln and Mercedes are among the automakers releasing 2012 models with cheaper initial prices. Most Toyota Camrys, for instance, will be less expensive: The 2012 hybrid is $1,150 cheaper than the 2011 version, while the Camry XLE is $2,000 less this year. The sticker price for the Jeep Grand Cherokee Laredo, meanwhile, is dropping by $3,220.
Volkswagen’s Passat is especially cheap compared to previous years: The 2012 model starts at $20,765, or $6,930 less than the 2010 starting price.
Cheaper prices should mean drivers will wind up paying less, right? Curiously enough, that’s not necessarily the case.
Car dealerships have a love-hate relationship with low MSRPs. They love that they can advertise the newly cheap starting prices as a way to attract buyers, but they hate to actually sell these models at the base price. They much prefer to sell cars with upgrades and “comfort packages” at prices far above the impressive-sounding initial MSRP. And for the most part, dealerships seem to get their way.
The 2011 Jetta boasted a starting price of under $16,000. But what did the average Jetta buyer wind up paying? Around $26K.
Volkswagen and other automakers contend that consumers really do want all the upgrades and special features rather than the bare-bones models with much cheaper price tags. But do buyers really have the choice to skip all the pricey options?
Sometimes, they don’t. The Hyundai Accent, for instance, starts with a super cheap MSRP of $12,445. The cheapest price anyone can pay for an Accent that’s actually available via a dealership or the company’s website, however, is $14,195. The Hyundai Elantra, likewise, in theory has an MSRP of $15,195, but a consumer trying to buy the car will only find vehicles starting at $16,445 at a minimum.
Hyundai maintains that it is only reacting to consumer demand—that few drivers want the cheaper models, and so they’ve stopped selling them. But to buyers who are drawn in by an impressively inexpensive list price, and who are only shown pricier options, this amounts to a bait-and-switch that’s annoying at best, fraudulent at worst.
There’s tons of anecdotal evidence out there suggesting that the same scenario happens all the time at car dealerships, particularly when it comes to vehicles that attract buyers mainly through a cheap starting MSRP—the Nissan Versa (good luck buying one at the sub-$11K starting price) being a prime example.